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RETIREMENT savers have cashed in £10.8bn from their pension pots during the first two years of new freedoms.

The latest pension freedom statistics from HMRC show 393,000 people took out £6.45bn in the last tax year from April 16 to 2017 – an average of £16,400 per person.

However the average withdrawal per person since 2015 continues to fall and now stands at £9,034 – less than half the average withdrawal in the first quarter of 2015 when people were first able to access their money.

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More than a billion (£1.59bn) was withdrawn in the first three months (Q1) of this year, according to latest figures from HMRC

Tom Selby, senior analyst at AJ Bell, said: “The pension freedoms have clearly been hugely popular and given industry reporting was optional in 2015/16, it’s likely the actual figure is significantly higher than the £10bn.

“It’s interesting to note that the average withdrawal per person continues to trend downwards, standing at just over £9,000 in Q1 2017.

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Savers withdrew around £1bn in the first three months of this year

“Hopefully this is indicative of savers managing their retirement incomes sensibly and making withdrawals at levels that will be sustainable over the long term.”

According to specialists Retirement Advantage, those people over the age of 55 who are allowed to take advantage of new rules introduced by then Chancellor George Osborne are being sensible.

More than a quarter (26 per cent) put the money in a savings account, while 19 per cent invested the money elsewhere and 12 per cent paid off the mortgage or other debts.

However Andrew Tully, pensions technical director at the group, warned of hidden tax bills for savers while the Treasury enjoyed a ‘tax bonanza’.

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The pension freedom accounts were hugely popular in 2015/2016 but are slowly trending downwards

In the March Budget, the Treasury admitted the pension freedoms have raised far more tax than anticipated - £2.7bn between April 2015 and April 2017 compared to their original estimate of £0.9bn.

Mr Tully said: “From the Government’s point of view this is a tax bonanza. While it is a welcome boost to government coffers, the tax will have been a nasty surprise for many people taking advantage of the new freedoms.

“Paying tax on withdrawals was predicted to act as a natural brake on retirees withdrawing too much too soon, but this clearly hasn’t been the case.

“With people living longer and inflation set to rise, it’s vital that people use their pension savings wisely to ensure their money lasts for the whole of their retirement.

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19 per cent of savers spent their money on holiday while 28 per cent paid for home improvements

Easy ways to save cash

1. Keep your shopping receipts as they regularly have offers and discounts off your next shop on the back

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2. Grow your own fruit and veg

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3. Bulk out your meals with lentils and chickpeas

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4. Make your own greetings cards

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5. Click and collect over using delivery to save delivery charges

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6. Take a re-fillable cup to coffee shops to receive a discount

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7. Use homemade cleaning products e.g. lemon, vinegar and baking soda

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8. Cancel gym memberships – exercise outdoors

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9. Shop at peak discount hours when you’re likely to find the best value money off labels and deals

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10. Create a meal timetable to make sure that nothing gets wasted

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“I doubt many Lamborghinis have been bought with the cash, but taking money out of a tax efficient pension to simply reinvest or put in a savings account, having paid tax on some or all of it, is not a sensible course of action.”

Sir Steve Webb, former pension minister now at mutual Royal London, famously said he was relaxed about lifelong pensioner savers using their money to buy the expensive sports car.

The pension spending data from Retirement Advantage 28 per cent of people spent their cash on home improvements and 19 per cent went on holiday.

Only 13 per cent bought a new car – though the data did not record if they were Lamborghinis which can cost upto £500,000 for a new model.